If an increase in labour and capital of 10 per cent leads to output increasing by 10 per cent then,ceteris paribus,the economy is operating with:

Question

Quizplus · Accepted Answer

When an increase in both labour and capital leads to a proportionate increase in output, it indicates that the production function is exhibiting constant returns to scale. This means that the increase in inputs leads to a proportional increase in output, indicating that there are no economies or diseconomies of scale present.

If an Increase in Labour and Capital of 10 Per